She said the price drop puts pressure on Samsung and even traditional fashion watch makers that are producing smartwatches to lower their prices. "The move will certainly put pressure on the competition and moreso on Fitbit, which has been the predominant player on the lower prices," Milanesi said.
While lower prices will lure in more buyers, there are still basic concerns about the overall smartwatch market.
"A year into the Apple Watch certainly hasn't lit the world on fire," said Kevin Burden, an analyst at 451 Research. "This drop in price is because the market is not making smartwatches indispensable to users. Apple looks at the year-end holiday period for the largest sales of the year, and the reality is that in the fourth quarter of 2015, their smartwatch barely sold during the holiday, and what sold better were [low-cost] fitness bands, which says it is a pricing issue."
Burden added: "At least Apple didn't kill the Watch and [instead] dropped the price and added new bands. It was a secret admission by Apple that it has more work to do on Watch 2, which has to have more functionality that makes it more for the every day user and not just a nice-to-have product."
He continued: "Apple didn't want a Watch 2 that was only a tick better than the original Watch. They know that users look at smartwatches the same way they look at first model-year cars: you don't buy a new car model in the first year. So Watch 2 should sell better and Apple realizes that."
Sign up for Computerworld eNewsletters.